In Asia, US protectionism looms ominously. Proposed trade bill would cost region up to one-third of its sales in the US
There is increasing alarm throughout Asia that lawmakers in the United States are about to crumble the region's basic economic building blocks -- its textile and garment industries. When the US House of Representatives passed the Textile and Apparel Trading Act (commonly called the ``Jenkins bill'' here) Oct. 10, long-standing concern over US protectionism turned into a near state of emergency among Asian trade officials and industrialists. Since then, there has been a series of official protests and popular demonstrations in the Philippines, Thailand, and elsewhere in the region.
The legislation, first introduced by Rep. Ed Jenkins (D) of Georgia, was also tentatively approved by the Senate Thursday night, pending a vote this week on an overall budget-cutting bill to which the textile legislation was attached. Principal sponsor of the textile bill is Sen. Strom Thurmond (R) of South Carolina, a staunch supporter of that sector of US industry. The Jenkins bill -- only the most recent effort by some members of Congress to protect US industry from foreign competition -- would limit
the growth of US textile imports to specified percentages above the levels reached in 1980.
``Emotions are running very high here,'' a South Korean executive said. Korean business and labor leaders say the country would face widespread bankruptcies and increased unemployment if the bill becomes law.
In effect, Asia would lose one-third of its sales to the US, the region's principal market, according to official figures. Exports to the US from the three major Asian producers -- Taiwan, South Korea, and Hong Kong -- would be cut by 45 percent, 35 percent, and 13 percent respectively. South Korea estimates that more than 500 local textile firms would be driven out of business with a loss of 35,000 jobs. These established producers, known as ``the big three,'' together account for roughly a third of US
``This is certainly not a new problem,'' says Robert Footman, Hong Kong's assistant trade director. ``And I don't expect it to go away.'' Along with other exporters, Hong Kong has been fighting the Jenkins bill and other US trade legislation through its own lobbyists in Washington as well as through US consultants and law firms.
But more seriously affected would be nations where the textile industry has grown rapidly only in recent years. Indonesia would lose nearly 90 percent of its market in the US and Thailand 70 percent. China, where textiles account for almost 40 percent of its exports to the US, says the bill will cost it $500 million annually in foreign exchange.
As elsewhere, these nations have adopted the textile industry as a primary engine of economic growth. It employs many, the required investment is low, and it is a quick source of foreign exchange.
Much of the region's recent growth has resulted from the spread of investment from advanced producers such as Hong Kong and South Korea, where wages are rising and further expansion is already limited by stringent export quotas. Hong Kong capital has been a major catalyst for growth in Sri Lanka, Malaysia, and elsewhere in Asia.
These newcomers to the market produce principally inexpensive products that compete with the mass-production segment of US industry. Analysts here say this means low- and middle-income consumers will be most affected if the Jenkins bill makes it past the Senate and President Reagan. (The administration has pledged it would block this bill.)
And in the longer term, they add, legislation like the Jenkins bill would not have the effect on the US trade deficit it is intended to have. Asian exporters will simply make higher-quality items to maintain their earnings -- thus competing with US manufacturers at a more advanced level.
``Everybody will move up-market,'' says Alex Blum, an American garment maker and long-time resident of Hong Kong. This process has already begun among the region's established producers.
US industry maintains that imported products now account for half of the domestic market -- a figure hotly disputed by exporting nations. Hong Kong puts the import percentage at closer to a quarter of total US sales.
Asian exporters also discount the Jenkins bill's contention that the surge of imports over the past several years has cost the US hundreds of thousands of jobs. Such unemployment, officials here say, chiefly reflects US industry's massive spending on new equipment and automated production processes.
Most Asian producers believe the Jenkins bill is partly intended to gain ground in current negotiations for a renewal of the Multi-Fiber Arrangement. The MFA is a 12-year-old umbrella pact under which nations negotiate import and export quotas.
The tough US position on its textile trade has been evident during most of President Reagan's term of office. The Jenkins bill -- which contravenes the MFA's regulations -- has forced many exporters to consider dropping out of the arrangement altogether.
``If this bill passes, what's left to negotiate?'' asks Donald Tsang, Hong Kong's acting trade director.
Mr. Tsang said after the House's approval of the bill that the vote count -- 262 to 159 -- indicated that support for it may be weakening and that the two-thirds majority required to override a veto may be difficult to muster.
In the Senate, Mr. Thurmond has modified the bill to gain support for it. For example, he has exempted Brazil because of its critical debt and aimed more directly at Asia's ``big three.''
Several analysts here believe China is also likely to be dropped from the bill because of its sensitive relationship with the US and its ability to retaliate against US grain growers and others building markets in China.
But for others in Asia, the bill is viewed fundamentally as an unjust reward for their adherence to the free-market system the US has fostered in the Pacific. In a speech to Congress before the House vote, Singapore Prime Minister Lee Kuan Yew said that protectionist legislation have taken on a political dimension in Asia. In Manila last week, a senior member of the Philippines National Assembly suggested linking the legislation to continued US use of military bases in the Philippines. Although the prop osal is unlikely to go very far, it is another indication of how seriously exporting nations view the House's action.